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Thales (FR:HO)
:HO
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Thales
(HO)
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Rating:73Outperform
Price Target:
€300.00
▲(17.23% Upside)
Action:ReiteratedDate:09/11/25
Thales's strong financial performance and positive earnings call are the most significant factors driving the score. However, the high P/E ratio and challenges in certain segments slightly offset these strengths. The technical indicators suggest a neutral trend, contributing to a balanced overall assessment.
Positive Factors
Cash Generation
Sustained, materially higher free cash flow underpins long-term financial flexibility: it funds R&D, capital projects, acquisitions and dividends without relying on external financing, and supports resilience through defense contract cycles and investment in strategic growth areas.
Balance Sheet Strength
Elimination of gross debt and elevated ROE signal durable solvency and efficient capital deployment. This reduces interest burden, increases capacity to pursue large multi-year defense contracts and strategic investments, and materially strengthens long-term funding optionality.
Defense Segment Momentum
Strong, contract-backed growth in Defense provides durable revenue visibility and margin stability amid geopolitical tailwinds. High order intake and production ramp-up support multi-quarter cash conversion and scale benefits across systems, services and long-term maintenance streams.
Negative Factors
Cyber & Digital Integration Risks
Integration setbacks in Cyber & Digital can erode growth and margin profiles over multiple quarters if unresolved. Delays absorbing acquisitions reduce cross-sell synergies and R&D leverage, risking slower secular adoption of higher-value cybersecurity services and impacting long-term profitability.
Space Segment Profitability
Persistently weak telco demand and low-margin contracts make Space a cyclical earnings drag. Until structural demand recovers or margins improve, Space will constrain consolidated profitability and require sustained management focus and possible restructuring to restore durable returns.
Net Debt Variability
A material seasonal rise in net debt indicates leverage volatility that can recur with dividends, acquisitions or working capital swings. If such increases persist, they may limit capital allocation flexibility, raise financing costs, and constrain the pace of strategic investment over the medium term.
Thales (HO) vs. iShares MSCI France ETF (EWQ)
Market Cap
€52.59B
Dividend Yield1.66%
Average Volume (3M)286.98K
Price to Earnings (P/E)76.7
Beta (1Y)0.75
Revenue Growth11.16%
EPS Growth-50.57%
CountryFR
Employees78,189
SectorIndustrials
Sector Strength72
IndustryAerospace & Defense
Share Statistics
EPS (TTM)5.27
Shares Outstanding205,941,910
10 Day Avg. Volume232,579
30 Day Avg. Volume286,977
Financial Highlights & Ratios
PEG Ratio0.49
Price to Book (P/B)3.79
Price to Sales (P/S)1.38
P/FCF Ratio14.14
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
€300.00Price Target Upside17.23% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering6
EPS Forecast (FY)10.93
Revenue Forecast (FY)€23.58B
Thales Business Overview & Revenue Model
Company DescriptionThales S.A. provides various solutions for civilian and military customers in the aeronautics, space, defense, security, ground transportation, and digital security markets worldwide. It operates through Aerospace, Transport, Defence & Security, and Digital Identity & Security segments. The company offers communications, command, and control systems; mission services and support; protection and mission/combat systems; surveillance, detection, and intelligence systems; training and simulation solutions for air, land, naval, and joint forces; and digital identity and security solutions. It also provides air traffic management solutions; flight decks and avionics equipment and functions; in-flight entertainment and connectivity systems and services; electrical systems; aerospace training solutions; navigation solutions; support and services for avionics equipment; and vision systems. In addition, the company designs, operates, and delivers satellite-based systems for telecommunications, navigation, earth observation, environmental management, exploration, and science and orbital infrastructures; signaling, communications and supervision, and fare collection management systems and related services; cybersecurity and railway digitalization systems; and main line rail, and urban and intermodal mobility solutions. Further, it provides solutions for various markets and applications, including radiology, radio frequency, microwave sources, training and simulation solutions, lasers, and microelectronics solutions for science, industry, space, defense, automotive, railways, and energy conversion platforms. Thales S.A. has a strategic agreement with Google LLC. The company was formerly known as Thomson-CSF and changed its name to Thales S.A. in 2000. Thales S.A. was founded in 1893 and is headquartered in Courbevoie, France.
How the Company Makes MoneyThales generates revenue through a diversified business model that includes the sale of high-tech products, systems integration services, and ongoing maintenance and support contracts. Key revenue streams come from defense contracts with governments, providing military systems and services; aerospace solutions for commercial airlines and business jets; and security systems for both public and private sectors. Additionally, Thales benefits from long-term partnerships with various governmental and commercial entities, which provide a steady flow of income through multi-year contracts. The company's focus on research and development also enables it to offer cutting-edge solutions, further driving sales and market demand.
Thales Earnings Call Summary
Earnings Call Date:Mar 03, 2026
(Q4-2025)
| Next Earnings Date:Jul 23, 2026
Earnings Call Sentiment Positive
The call portrays a predominantly positive performance: record order intake, strong organic sales growth (+8.8%), improved margins (adjusted EBIT +13% to EUR 2.7bn; margin 12.4%), exceptional free cash flow generation (+27% to EUR 2.6bn) and reduced net debt (EUR 1.6bn). Strategic moves (space MoU, SAMP/T NG wins) and sustained R&D/AI investment underpin medium-term growth. Main negatives are underperformance and integration drag in Cyber & Digital, FX and one-off financial impacts, a French tax surcharge recurrence, higher near-term CapEx, and regulatory uncertainty around the proposed space JV. Overall, highlights materially outweigh the lowlights, supporting a positive outlook provided Cyber recovers as management expects.Q4-2025 Updates
Positive Updates
Record Order Intake and Strong Commercial Momentum
Order intake reached EUR 25.3 billion (matching 2024 record). Book-to-bill was 1.14 at group level and 1.24 for Defence. Defence orders totaled EUR 15.1 billion with 28 orders > EUR 100m (20 in Defence). Backlog stood at EUR 42 billion (≈3.4 years of sales), supporting near-term visibility.
Robust Sales Growth
Group sales reached a record EUR 22.1 billion, with sharp organic growth of +8.8% (reported growth +7.6% after FX and scope). All emerging markets (Asia, Middle East, Rest of World) recorded double-digit organic growth.
Profitability Improvement
Adjusted EBIT increased by more than 13% to EUR 2.7 billion, with adjusted EBIT margin improving to 12.4%. Adjusted net income, group share, crossed the EUR 2 billion mark, up +5.5% (adjusted EPS EUR 9.76).
Exceptional Cash Generation and Deleveraging
Free operating cash flow from continued activities rose +27% to EUR 2.6 billion, delivering a conversion ratio of 128% (adjusted net income -> FOCF). Net debt reduced significantly to EUR 1.6 billion at end-2025, enabling balance-sheet strength.
Shareholder Returns Increased
Board proposed a dividend of EUR 3.90 per share, up +5.5% vs 2024 (payout ratio 40%), reflecting confidence in cash generation and commitment to returns.
Aerospace & Space Recovery and Profitability
Aerospace sales were EUR 5.9 billion with organic growth +8.7%. Aerospace adjusted EBIT rose strongly (Avionics double-digit growth) and segment EBIT reached EUR 560 million, a +39% organic improvement, margin 9.5%. Space returned to positive adjusted EBIT in 2025 and secured large contracts including IRIS2 initial phase.
Defence: Strong Growth and Strategic Wins
Defence delivered double-digit organic growth, record order intake (EUR 15.1bn), many large flagship contracts (air defence, LMM missile, land surveillance). SAMP/T NG commercial validation (Denmark selection) positions Thales for further exports.
Technology & R&D Leadership (AI, Quantum, Fusion)
Investments in innovation: ~800 AI experts, ~100 PhD students, 200 AI patents; cortAIx deployed across 5 country hubs, embedded in 100+ products and 250+ use cases. Concrete AI-enabled product wins (TALIOS pod, autonomous mine countermeasures). Continued R&D investment (R&D ~6% of sales).
ESG Progress
Scope 1 & 2 CO2 emissions reported down 75.2% (reference 2018 baseline for target achievement), Scope 3 down 15.4% vs 2018; achieved 2030 climate targets ahead of schedule for third consecutive year. Climate training completion for managers 94.6% vs 85% target; women in senior management 21.8% (on track to 25% by 2030).
Negative Updates
Cyber & Digital Underperformance and Integration Headwinds
Cyber & Digital sales were broadly flat organically. Cyber Products declined low single-digit organically (impact from Imperva salesforce merger / higher staff turnover until Q3); Cyber Services down double-digit (soft Australian market). Payment card volumes remained low. Management expects gradual recovery in 2026 but the segment weighed on group performance in 2025.
Currency and One-off Financial Headwinds
Stronger euro vs major currencies created a -1.5 percentage point headwind on reported sales growth and a -EUR 37m impact on EBIT. Other financial results moved to -EUR 28m vs +EUR 35m in 2024 due to non-recurrence of positive one-offs, slightly depressing net income.
Tax Surcharge Impact and 2026 Recurrence
Income tax included a EUR 75m French tax surcharge in 2025 (effective tax rate 24.1%). A recurrence in the 2026 French budget is expected to cost ~EUR 90m in 2026 (≈EUR 50m increase vs 2025) and a ~EUR 8m impact on share of Naval Group net income.
Rising Capital Intensity and Near-term CapEx Increase
Net operating investments were significantly up at -EUR 746m in 2025 (aligned with guidance 3–3.5% of sales). 2026 CapEx guidance increases to ~EUR 820–850m (≈3.5% of sales), increasing cash needs even as the company invests to capture defense ramp-ups.
BROMO / Space JV Uncertainty and Regulatory Risk
MoU with Airbus and Leonardo to create a European space champion (target operational 2027) remains subject to social and antitrust approvals; management cited constructive discussions but authorization is not guaranteed, creating timing and execution risk.
Geographic / Market Concentration Risks and Exposure
Revenue related to Ukraine increased materially (≈EUR 450m in 2025, up from EUR 200m in 2024 — ~3.5% of Defence revenue); while still limited, it is a growing exposure and may introduce geopolitical/operational risk if conditions change.
Company Guidance
Thales guided 2026 to a book‑to‑bill above 1, group organic sales growth of 6–7% (implying sales of €23.3–23.6bn including FX), an adjusted EBIT margin of 12.6–12.8%, and free operating cash‑flow conversion of 95–100% (versus a 2024–28 target average of 95–105%); CapEx is expected around €820–850m (~3–3.5% of sales), net debt stood at €1.6bn at end‑2025, the Board will propose a €3.90 dividend (+5.5%, c.40% payout), and divisional phasing assumes Defence growing high single‑digit (backlog €42bn, ~3.4 years of sales), Aerospace mid‑single‑digit (avionics mid‑single‑digit) and Cyber & Digital mid‑single‑digit overall (cyber above, digital lower), while management reiterated the 2028 ambition of roughly 13–14% EBIT margin; note also an expected French tax surcharge impact of ~€90m in 2026.Thales Financial Statement Overview
Summary
Thales has shown impressive financial performance with strong revenue and profit growth, improved operational efficiency, and excellent cash flow management. The elimination of debt in 2024 significantly strengthened its financial stability, though the high liabilities-to-assets ratio remains a point to watch.Income Statement
Thales has demonstrated strong revenue growth with a notable increase from €18.43 billion in 2023 to €20.58 billion in 2024, marking an 11.65% growth. The gross profit margin remained high at 26.11% for 2024, indicating efficient cost management. The net profit margin improved significantly from 5.55% in 2023 to 6.90% in 2024, reflecting enhanced profitability. EBIT and EBITDA margins also improved, suggesting operational efficiency gains.82
Very Positive
Balance Sheet
Thales's balance sheet is robust with a strong equity position. The debt-to-equity ratio improved significantly, as total debt was eliminated in 2024, reducing financial risk. Return on equity (ROE) improved to 18.89% in 2024, indicating effective use of shareholder funds. However, the equity ratio was 18.80%, suggesting a relatively high level of liabilities compared to assets, which requires monitoring.75
Positive
Cash Flow
Thales exhibited excellent cash flow management with a substantial increase in free cash flow from €0.97 billion in 2023 to €2.01 billion in 2024, a growth of 107.54%. The operating cash flow to net income ratio was strong at 1.86, indicating robust cash generation relative to accounting profits. The free cash flow to net income ratio also improved, reinforcing the company's ability to generate cash.88
Very Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 21.35B | 20.58B | 18.43B | 17.57B | 16.19B | 16.99B |
| Gross Profit | 5.58B | 5.37B | 4.77B | 4.46B | 4.03B | 3.94B |
| EBITDA | 2.51B | 2.67B | 2.46B | 2.29B | 2.17B | 1.65B |
| Net Income | 683.00M | 1.42B | 1.02B | 1.12B | 1.09B | 483.40M |
Balance Sheet | ||||||
| Total Assets | 38.89B | 39.99B | 38.79B | 34.42B | 32.84B | 31.81B |
| Cash, Cash Equivalents and Short-Term Investments | 3.89B | 4.77B | 4.08B | 5.30B | 5.05B | 5.00B |
| Total Debt | 7.31B | 7.82B | 8.43B | 5.47B | 5.92B | 7.60B |
| Total Liabilities | 31.72B | 32.43B | 31.82B | 27.04B | 26.12B | 26.50B |
| Stockholders Equity | 7.14B | 7.52B | 6.83B | 7.17B | 6.48B | 5.11B |
Cash Flow | ||||||
| Free Cash Flow | 2.54B | 2.01B | 970.80M | 2.56B | 2.26B | 950.20M |
| Operating Cash Flow | 3.16B | 2.64B | 1.60B | 3.06B | 2.71B | 1.35B |
| Investing Cash Flow | -949.20M | -62.80M | -4.23B | -1.21B | -493.40M | -386.40M |
| Financing Cash Flow | -2.25B | -2.00B | 1.59B | -1.77B | -2.17B | 1.20B |
Thales Technical Analysis
Positive
255.90
Price Trends
251.84
Positive
245.35
Positive
245.13
Positive
Market Momentum
0.80
Positive
52.29
Neutral
44.39
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FR:HO, the sentiment is Positive. The current price of 255.9 is above the 20-day moving average (MA) of 253.30, above the 50-day MA of 251.84, and above the 200-day MA of 245.13, indicating a bullish trend. The MACD of 0.80 indicates Positive momentum. The RSI at 52.29 is Neutral, neither overbought nor oversold. The STOCH value of 44.39 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for FR:HO.
Thales Peers Comparison
UnderperformOutperform
Sector (63)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | €140.12B | 19.80 | 35.36% | 0.97% | 14.19% | 161.87% | |
74 Outperform | $2.28B | 1,630.09 | 1.12% | ― | 29.80% | ― | |
73 Outperform | €52.59B | 76.65 | 14.51% | 1.66% | 11.16% | -50.57% | |
71 Outperform | €26.44B | 33.87 | 12.93% | 1.74% | 29.91% | -2.24% | |
66 Neutral | $141.92B | 27.86 | 23.44% | 1.53% | 7.05% | 54.98% | |
63 Neutral | $10.79B | 15.43 | 7.44% | 2.01% | 2.89% | -14.66% | |
60 Neutral | €2.42B | 18.30 | 6.49% | 0.74% | 9.17% | 12.78% |
* Industrials Sector Average
FR:HO
Thales
255.90
36.96
16.88%
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132.20
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327.14%
FR:AIR
Airbus Group SE
180.28
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5.71%
FR:AM
Dassault Aviation
338.60
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21.58%
FR:FII
Lisi SA
53.30
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93.10%
FR:SAF
SAFRAN SA
336.10
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31.79%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.